It was all setting up so nicely for crude-tanker stocks until those Trump tweets on Thursday morning …
Shares of companies that own very large crude carriers (VLCCs; tankers that carry 2 million barrels of crude) had been climbing steadily since early March, pulled upward by spot rates of over $200,000 per day and expectations for a spike in floating-storage contracts.
Then, like a roller coaster that rumbles over the top of the slope and gathers speed on the other side, the stocks came back down.
At 10:30 a.m. Thursday, the U.S. president tweeted that Saudi Arabia and Russia would cut production by 10 million barrels per day (b/d), then: “Could be as high as 15 … GREAT news for everyone!”
Actually, not everyone. Reduced output equates to fewer VLCC cargoes and less future storage. Merely talking about production cuts can immediately incentivize tanker owners to accept lower rates.
Between the tweets and Friday’s closing bell, crude pricing rose 30% and VLCC stocks went in the opposite direction, despite the fact that VLCC spot rates still exceed $220,000 per day: DHT (NYSE: DHT) fell 22%, Frontline (NYSE: FRO) 21%, Euronav (NYSE: EURN) 16% and International Seaways (NYSE: INSW) 13%.....MUCH MORE
The wild trading on Thursday was way out of proportion to fundamentals, Evercore ISI analyst John Chappell said in an interview with FreightWaves on Friday.
“Everything was exacerbated by the computers [algorithmic trading] and the ETFs [exchange-traded funds]. Should oil really have been up by 47% at one point yesterday and tanker stocks down at one point by 25%? No. There was trading off of a headline and then a piling-on.”....
Do tell.
(all via FinViz)
Recently:
"Tanker Rates Double as Oil Contango Spreads"
"Saudi Arabia Tanker Power Play Could Backfire as Oil Demand Shrinks"
"Glencore Charters One of the World’s Biggest Tankers to Store Oil at Sea" (EURN)
"Oil’s big storage problem" (TNK; FRO; EURN)
